FSC asks for information on PEMGroup activities

CONSPIRACY? A ‘Wall Street Journal’ report quoted an unnamed past company president as saying the California-based firm partly relied on a Ponzi scheme

By Janet Ong / BLOOMBERG

The nation’s financial regulator is asking Standard Chartered Plc and three domestic lenders to provide information on investment products created by Irvine, California-based Private Equity Management Group Inc (PEMGroup).

The Financial Supervisory Commission (FSC) is requesting help from Standard Chartered, Hua Nan Commercial Bank Ltd (華南銀行), Bank SinoPac (永豐銀行) and Taichung Commercial Bank Co (台中商銀) in determining the amount of securities tied to PEMGroup that have been sold, Chang Ming-daw (張明道), head of the regulator’s banking bureau, said by telephone yesterday.

“We are investigating the matter and asking the four banks to give us more details on the sale of the products in Taiwan,” Chang said.

PEMGroup founder Danny Pang (彭日成) stepped down as the company’s chairman and chief executive officer pending the results of an internal investigation of policies and procedures, the company said yesterday in a statement.

PEMGroup directors formed a committee and hired the law firm Gibson Dunn & Crutcher LLP to “assist in the investigation,” the release said.

Robert Anderson, PEMGroup’s former chief operating officer, is now serving as interim chairman, while chief financial officer Wilbur Quon has voluntarily stepped aside pending the outcome of the internal inquiry, the statement said.

“PEMG takes very seriously the trust its clients have placed in it and as such, we intend to fully investigate allegations and issues raised,” Anderson said in the statement.

A Wall Street Journal article on Wednesday cited an unidentified former PEMGroup president as saying that Pang, 42, told him that part of the company relied on a Ponzi scheme. Pang’s academic credentials and claims that he worked at Morgan Stanley may be fabricated, the Journal said.

It has been reported that PEMGroup raised most of its funds in Taiwan, where Pang was born. The California-based firm invests in US assets such as company debt, time-share properties and life-insurance policies bought at discount.

A person who answered the phone at PEMGroup’s Shanghai office and declined to give his name denied the existence of a Ponzi scheme.

Hua Nan bank, a unit of Hua Nan Financial Holdings Co (華南金控), said in a statement on its Web site on Thursday that the principal and interest on products it sold on behalf of PEMGroup were guaranteed by “large international financial institutions.”

The bank didn’t name what these institutions were.

“We are aware and are looking into this matter,” Standard Chartered Bank Taiwan Ltd said in an e-mailed statement on Friday. “We are cooperating with the FSC.”

Robert Lin (林安峰), vice president and spokesman of Taichung Commercial Bank, whose PEMGroup investments were backed by German insurer Talanx AG, wasn’t available for comment.